#HedgePapers No. 34 – Rigging the System: How Hedge Fund and Private Equity Billionaires Are Manipulating New York Elections With Help from the Karl Rove-Koch Brothers Empire

“New Yorkers for Independent Action” is a new three-million-dollar Super PAC trying to buy elections in middle-class, working-class and low-income communities from the Bronx to Long Island.[1]

We’ve prepared this paper so that the public can understand how “New Yorkers for Independent Action” is spending their big bucks:

On TV ads Utilizing The Karl Rove-Koch Brothers Media-Buying Arm

On Scandal-Linked Field Consultants in Brooklyn

On Republican Election Lawyers in Albany

On Scandal-Linked Mail Consultants In Westchester

On Who Knows What with an Anonymous LLC in the Bronx

On Limousines, Hotels, Flights to Miami And High-End Meals

It’s the latest political effort from the Invest in Education Foundation, the same folks who lobbied for lavish refundable tax credits for billionaire and millionaire donors to elite private schools and privatized charter schools in 2015.[2]

So far, they haven’t been able to pass their special tax break legislation in Albany, despite support from Republicans in the State Senate and from Governor Andrew Cuomo. Assembly Democrats have blocked the plan to give extra tax breaks to wealthy donors to private schools on top of the tax deductions they already get.[3]

So now the billionaires and millionaires from Park Avenue, Fifth Avenue and Greenwich, Connecticut have redoubled their efforts: they’re targeting progressive pro-public-school Democrats in September primary elections and working to elect more Republicans and more malleable Democrats to the State Senate.

The “New Yorkers for Independent Action” billionaires are working on their own and in coordination with the billionaires of “New Yorkers for A Balanced Albany” on media buys, political consulting, robocalls and harsh direct mail campaigns.

Come November, they’re hoping to ride the dog whistles and bombastic rhetoric of the Donald Trump wave to elect a legislature more favorable to their anti-public education viewpoint.

While they’re raking in money from hedge fund billionaires and the rest of the plutocrat class, New Yorkers for Independent Action is splashing money around the political class in Albany, New York City and Westchester County – and to mysterious unmarked post office boxes in Virginia.

And we prepared this paper to “follow the money” from the billionaires to the consultants, media buyers and pollsters on to the sketchy attack ads, harsh mailers and paid Facebook posts that will overwhelm and annoy voters across New York in the coming weeks.

KOCH BROTHERS/KARL ROVE EMPIRE NOW WORKING IN NEW YORK STATE ELECTIONS

New Yorkers for Independent Action Spent $250,000 to New Yorkers for a Balanced Albany, likely as a pass-through to Karl Rove/Koch Brothers-linked Herd Media

Last April 6, during the hard-fought special election to replace the disgraced former leader of the State Senate Republicans after his conviction on federal corruption charges, New Yorkers for Independent Action transferred a quarter-million dollars to a similarly-named independent expenditure committee, New Yorkers for a Balanced Albany.[5]

As fans of the Hedge Clippers may recall, New Yorkers for a Balanced Albany was the vehicle utilized by a small group of billionaire hedge fund managers to flip the New York senate in 2014.[6]

The day after New Yorkers for Independent Action made their $250,000.00 contribution, New Yorkers for a Balanced Albany spent $1 million on media buys opposing Nassau County Democratic Senate candidate Todd Kaminsky.[7]

The ad buy was done through a company called “Herd Media,” which has never been a vendor to another political effort in New York, according to a search of data collected by the New York State Board of Elections.

Since their formation in 2014, New Yorkers for a Balanced Albany has spent a total of $4,728,246.54 with Herd Media, slightly more than half of the $8,850,000 they have raised to date.

New Yorkers for Independent Action joined the “Herd” last April.

Who’s behind Herd Media? Karl Rove and the Koch Brothers

Herd Media is not an easy company to track down.

All campaign filings list the Herd office as a UPS store in the Virginia suburbs of Washington, DC. Since they are an unincorporated entity, the only record of their existence is a “doing business as” (DBA) filing made before the Alexandria, Virginia Clerk of Courts.

Using these filings is a great way to hide your company from prying eyes, as Virginia does not have a central database of DBA filers.

Herd Media appears to have only worked for two other campaigns, doing ad buys for Liz Cheney’s 2014 bid for a Wyoming Senate seat, and Character Counts PAC, a 2014 effort to elect Weston Wamp in a Tennessee congressional race.[8]

The company is actually an assumed name for X/Roads Communications LLC, the legal name for a company known as Crossroads Media.

Michael Dubke, the president of Crossroads, is also the president of Americans for Job Security, the dark money group that spent millions fighting the millionaires’ tax in California.[9]

His media firm shares more than just its name with arch Republican operative Karl Rove’s Crossroads GPS—Crossroads Media handles millions in ad buys for Rove’s dark money groups, and has been described as “effectively an in-house ad agency for Rove’s political empire.”[10]

Crossroad Media’s offices do not sit at the UPS box indicated on Herd Media’s New York political filings.

They’re located at Suite 555 of 60 Canal Center Plaza, the infamous location used to simultaneously house Mitt Romney’s 2012 presidential campaign and two allegedly independent political action committees that supported it.[11]

The same office suite houses Americans for Job Security, the Koch-brothers dark money group used to secretly fund a campaign against California’s millionaire tax, Proposition 30.[12]

The coordination of spending between “New Yorkers for Independent Action” and “New Yorkers for A Balanced Albany” encourages a look beneath the covers of education policy fights to tax policy fights, and specifically the billions of dollars in special tax breaks currently enjoyed by hedge fund and private equity managers – many of whom have donated big bucks to the two Super PACs.

New Yorkers for Independent Action is an arm of Tom Carroll’s Invest in Education Foundation, the same folks who lobbied for lavish refundable tax credits for billionaire and millionaire donors to elite private schools and privatized charter schools in 2015.[13]

New Yorkers for a Balanced Albany was, ostensibly, a creation of embattled education reform group “StudentsFirst New York.”[14]

If it seems odd that New York groups allegedly created to help poor minority children access higher quality educational institutions would send millions of dollars to Karl Rove’s “in-house ad agency,” consider the content of the ad that New Yorkers for a Balanced Albany released: it has nothing to do with education.

The central message of the ad is that New York lawmakers could raise taxes.[15]

And that’s a real fear — for hedge fund billionaires like Roger Hertog and Sean Fieler and private equity barons like Russell Carson and Robert Niehaus of “New Yorkers for Independent Action,” and for hedge fund billionaires Paul Singer, Dan Loeb, Paul Tudor Jones and the others who backed “New Yorkers for A Balanced Albany.”

Their fat wallets could get hit by fair-share tax proposals now being considered in Albany – but those tax proposals don’t hit regular New Yorkers at all; in fact, they could help fund property tax relief and better funding of local schools.

Just this year, Albany Democrats and Independent Democrats introduced legislation that would close the carried-interest loophole and eliminate the tax advantage enjoyed by the hedge fund and private equity industry.[16]

And the plan won widespread approval from newspaper editorial boards and even many of the millionaires who’d pay higher taxes.[17]

Billionaires and millionaires definitely want special tax breaks: both for donations to elite private schools, and for the sham fiction of “carried interest” as something other than fees for business services.

It looks like they’re working hard – and putting their power, influence and wealth on the line – to keep the special tax breaks they now enjoy and to get even more.

SHADOWY CONSULTANTS, LIMOUSINES & FLIGHTS TO MIAMI: LIVING LARGE WORKING FOR THE BILLIONAIRES

Three million dollars in donations from billionaires and millionaires can get vaporized in an instant in the world of politics, media and shadowy campaign consultants. “New Yorkers for Independent Action” spread their cash around New York too – their shopping list wasn’t limited to Karl Rove and the Koch network folks down in Virginia.

Bradley Tusk: Shadowy Anti-de Blasio Consultant to Billionaires

Why have the billionaires and millionaires behind “New Yorkers for Independent Action” and “New Yorkers for A Balanced Albany” gone to such lengths to hide their affiliations with Karl Rove and the Koch brothers?

Perhaps the answer lies in another major vendor to New Yorkers for a Balanced Albany: Bradley Tusk and Tusk Strategies.

Tusk, a former aide to imprisoned former Illinois Governor Rod Blagojevich, has received a total of $493,866.20 from New Yorkers for a Balanced Albany, plus at least $338,508 from the PAC’s sponsoring organization, StudentsFirst New York.[18]

Tusk, formerly a Democrat staffer, has hung a shingle for the anti-Bill de Blasio crowd, self-funding (for now) a website and earned-media campaign to attack the sitting Democratic Mayor.[19]

He’s got the money to do hit-job-for-hire attacks on the Mayor because of his lucrative gigs working for Silicon Valley billionaires and Uber, the gambling website FanDuel, his consulting-and-lobbying-for-start-ups group Tusk Ventures[20] and to keep making payments on his Gramercy Park mansion.[21]

Insiders have speculated that the hedge fund, real estate and private equity billionaires funding coordinated state-level Super PACs may be preparing to take out de Blasio in favor of candidate who will protect their favored interests, including special tax breaks and privatized charter schools.

Of course, if the Democrats Tusk is targeting knew his work was so intimately connected to the Karl Rove – Koch Brothers right-wing network, it might harm his efforts to hurt de Blasio.

New Yorkers for Independent Action has given a total of $68,000 to Musa Moore and “Time for Change Consulting” a business with an address listed as Moore’s Brooklyn condo.

All but $18,000 was spent with “Time for Change Consulting,” which has repeatedly been alleged to have ties to former assemblyman Clarence Norman, Jr.[22][23]

A “Brooklyn insider” told the New York Post that Musa Moore “runs that organization but Clarence is the power behind it.”[24]

Clarence Norman (r) described as ‘the power behind’ Time for Change Consulting

Clarence Norman, Jr. was convicted in 2005 of charges related to campaign finance and elections law violations.

Among the charges, Norman was found to have used his position as the chair of the Brooklyn Democratic Party to steer political consulting contracts toward his allies.[25]

Spending Billionaire Money on Election Lawyers in Albany: $7,472.50 To The Top Lawyer For The New York Republican State Committee

On June 8, 2016, New Yorkers for Independent Action paid $7,472.50 to Jeffrey T. Buley, an attorney at the Albany office of Brown Weinraub.[26]

Buley has served as the General Counsel to the New York Republican State Committee since 1991 – he’s also worked for big shot Republicans George Pataki, George W. Bush, Dick Cheney and Mitt Romney.[27]

Jeffrey Buley (center) is a GOP lawyer now working in Democratic primaries

Buley usually works against Democrats and for Republicans, but in this primary race he’s working for billionaires, for some Democrats and against other Democrats.

For now, New Yorkers for Independent Action is seeking to elect malleable legislators in six statehouse races, but after the primaries they may well pile into more races with Republicans, like their sister Super PAC New Yorkers for a Balanced Albany.

During the fall election the state’s Republican party – and its General Counsel, Mr. Buley – will be allowed to coordinate its efforts with those candidates.

LaVinga, a polling consultant who built his career working with State Senate Republicans, was the head of 2014’s “Balance New York,” another billionaire-driven independent expenditure committee that helped hand the New York senate to the Republicans in 2014.[28]

The Balance New York effort was funded, in part, by Karl Rove’s Republican State Leadership Committee.[29]

The billionaires and millionaires behind “New Yorkers for Independent Action” are now using this Republican pollster to take out progressive Democratic incumbents in Democratic primaries – to the tune of $157,000.00.

LaVinga personally received $5,500 from New Yorkers for Independent Action. The additional $151,500 went to Eagle Point Strategies LLC, LaVinga’s consulting firm.[30]

New Yorkers for Independent Action made eleven payments, totaling $128,490.63 to “Euclid Hill Group LLC,” a non-member limited liability corporation.

The payments list Euclid Hill’s address as a Post Office Box in Amawalk, New York.

According to data compiled by the New York State Board of Elections, Euclid Hill Group has never been a vendor for any political committees or campaigns except New Yorkers for Independent Action.[31]

While Euclid Hill Group doesn’t appear in any other financial disclosures, the post office box used by Euclid Hill Group does show up in other campaign disclosures.

Frank Sanzillo & Associates uses the same PO Box in an October 2015 filing with New Yorkers for Independent Action.[32]

A longtime Albany fixture, Sanzillo has seen his share of political scandals.

In 1987, Sanzillo, then secretary to former Senator minority leader Manfred Ohrenstein, was indicted for allegedly using legislative funds for political purposes.[33] Charges against Sanzillo were later dropped, and Sanzillo requested that the state reimburse his legal expenses.[34]

Sanzillo’s name would surface again in 2010, during an investigation into pension corruption.

In exchange, court documents said, Mr. Broidy conferred roughly $75,000 worth of travel benefits on Mr. Hevesi and donated or raised more than $500,000 for his campaign. Mr. Broidy also paid $380,000 to an unnamed lobbyist.

According to people with knowledge of the case, that lobbyist is Frank Sanzillo.

According to reporting in The New York Times, Sanzillo was one of several individuals who got money from Markstone Capital Partners in connection with a pension pay-to-play deal that saw former Comptroller Alan Hevesi steer $250 million from the New York State Pension Fund to Markstone.[35]

Sanzillo was not named in the indictment, but was reported to have received $380,000 in the scheme.[36]

Sanzillo was repeatedly mentioned in a 2010 New York Inspector General inquiry into the Aqueduct Racino bid-rigging scandal.

Sanzillo was not alleged to have done anything improper in that investigation, which largely faulted a poorly structured procurement process that opened the door to abusive lobbying.[37]

Sanzillo also had a long-serving retainer with Leonard Litwin’s Glenwood Management, the embattled development company enmeshed in the Sheldon Silver and Dean Skelos scandals that was the subject of our first Hedge Paper.[38]

Whatever Sanzillo’s role in the New Yorkers for Independent Action saga, his role as advisor to a group that seeks to spend millions influencing six statehouse races will likely benefit his lobbying career.

The trend of lobbyists working as campaign consultants has been on the radar of political watchdogs for years.[39] With hedge fund billionaires continuing to buy their way into Albany, advising big-dollar independent expenditure committees is probably more cost-effective than wagering on the electoral chances of one Assembly or Senate candidate.

Spending Billionaire Money Mysteriously In The Bronx: $104,000 In Professional Services To A Recently-Incorporated Anonymous LLC

New Yorkers for Balanced Albany has spent a total of $104,000 with “MKG Strategies LLC,” a limited liability company incorporated less than a month before it began receiving payments for “professional services.” [40]

The company lists no members, and uses a Bronx PO Box as their address.

Attempts to determine the true owner of this company by reviewing public record filings were not successful.

A review of the New Yorkers for Independent Action expenditures shows a pattern of spending on luxury goods and restaurants.

Since inception, the committee has spent $1,319.73 at restaurants including the New York Athletic Club, celebrity chef Laurent Tourondel’s L’Amico, and San Pietro. Three purchases at the Apple store inside Albany’s Crossgates Mall ran up $1,739.98.

The outfit also spends heavily on travel, including $938 on limousine services in the DC area, and $1,933.90 on hotels in New York City and St. Petersburg, Florida. They’ve also spent nearly a thousand dollars on airline travel, including purchases at the Miami International Airport.

Categories:

Who Are the HedgeClippers?

The Hedge Clippers are working to expose the mechanisms hedge funds and billionaires use to influence government and politics in order to expand their wealth, influence and power. We're exposing the collateral damage billionaire-driven politics inflicts on our communities, our climate, our economy and our democracy. We're calling out the politicians that do the dirty work billionaires demand, and we're calling on all Americans to stand up for a government and an economy that works for all of us, not just the wealthy and well-connected.